China’s role in helping the world economies
With the global markets witnessing another economic meltdown and the analysts issuing warning against more market crashes to follow in the years to come, the world’s economic giant, Peoples Republic of China, has assumed a leadership role to help lead the effort to revive the global economy.
Amid stock market crashes already happening in 23 different nations around the planet, most of the countries have either no plan on how to check the global economic slump or their response is a bit sluggish or faulty without any drastic reforms to help boost their dwindling economies.
China has, however, come up with the idea to jointly deal with the economic recession. During the Summer Davos Forum, Prime Minister of China Mr Li Keqiang unveiled his country’s strategy to deal with the issue, saying China was “encouraging mass entrepreneurship and innovation” to deal with the global economic recession.
Currently, the global economy is still undergoing fluctuations and its recovery lacks speed and momentum. China is an exception in that despite suffering some initial crunch, its economy has been able to witness stability and is growing at an average of seven percent. China’s economy is now running within a “reasonable range” and its fundamentals for overall stability remain unchanged.
So it still serves as an important force for global economic growth. The Chinese leadership has the wisdom and ability to keep the economy growing at medium-high speed and towards medium-high level.
Explaining his government’s plans to deal with the economic meltdown, Mr Li told the gathering of over 200 people including principals from the world’s top 500 transnational corporations, leaders of industrial and commercial circles, think tank members, media workers and others attending the dialogue, that all countries should join hands with mutual help, play on their comparative advantages and together blueprint economic growth thus open a new chapter in global economy.
Entrepreneurs and business tycoons are already worried of what could happen to their hard earned money if it gets wiped out in a sudden financial collapse anytime. There is an unprecedented amount of buzz about the potential for a giant stock market crash by the end of the year 2015 or by the start of 2016.
“To achieve global economic recovery in real terms, we must have a strong, sustained and balanced economic growth and cultivate new impetus,” he said and added that his government will continuously and unswervingly deepen reform in a comprehensive way and gradually enhance China’s opening up to the outside world.
Mr Klaus Schwab said that the Summer Davos Forum was growing in influence, showing that the international community had confidence in China’s future economic development.
China plans to work with transnational enterprises to develop its own market and third-party markets for mutual benefit, common development and prosperity.
Though the Chinese economy has suffered some recent blows but China has not been swayed away by short-term fluctuations of some indicators and the underlying trend remains positive. There has been overall stability in economic development of China despite certain moderation in speed. The general trend is positive yet there are also difficulties to overcome. Fluctuations in some economic indicators can be seen on a monthly or quarterly basis but the economy is still running in a reasonable range.
What China has done to stabilise its economy is that it concentrated and strengthened targeted and discretionary regulation. In the first half of this year, the Chinese economy increased by seven percent and was ranked one of the highest among the world’s major economies.
Such a rate is acceptable as long as China has relatively sufficient employment, simultaneous increase in income and a constantly improved environment. There have been new fluctuations on the global financial markets recently and there were also unusual fluctuations in China’s stock market. Relevant authorities have taken steps to stabilise the market to forestall potential systemic financial risks.
China plans to develop a multi-tiered capital market while sticking to the directions of marketisation and legalisation in reform and more quickly cultivating an open and transparent capital market with long-term, steady and healthy development.
China’s government debt is still at quite a low level and the risks are controllable. So pressing ahead with the financial reform and opening-up and easing market access for private banks would be a good idea as well as promoting orderly introduction of foreign investors and their partnerships with Chinese counterparts. China has no plans to waver in its commitment to pursuing the reforms nor will the reforms grind to a halt.
The real effective exchange rate (REER) of the RMB has appreciated 15 percent since the formation of the current government. China plans to improve the quotation regime of the RMB central parity in order to make the RMB exchange rate more market-oriented.
China believes there is no basis for continued depreciation of the RMB and the rate will be kept basically stable at a reasonable and balanced level. China also has no intention to boost exports by devaluing the RMB or to see a global “currency war”. A continuous devaluing of the RMB is not conducive to the RMB internationalisation process as China is not a source of risks for the world economy but a driver of world economic growth.